India PMI March 2016

India: PMIs signal improvement in economic conditions in March

April 6, 2016

The manufacturing Purchasing Managers’ Index (PMI), elaborated by Nikkei and Markit, rose from February’s 51.1 to an eight-month high of 52.4 in March. As a result, the PMI lies further above the 50-threshold that separates expansion from contraction in business activity in the manufacturing sector.

According to Nikkei, March’s result came on the back of stronger inflows of new business, which fueled an acceleration in output. In addition, strong demand led firms to increase buying levels. That said, employment levels were broadly unchanged and evidence gathered from the survey suggest that spare capacity persists. Meanwhile, the depreciated value of the rupee led input costs to rise and output charge inflation hit a 16-month high.

In addition, the Nikkei services PMI improved in March, rising from February’s 51.4 to 54.3. As a result, the indicator rests in expansionary territory. According to Nikkei, business activity increased in five of the six broad sectors surveyed, supported by notable increases in new orders. Markit analysts commented, “March PMI surveys signalled a reassuringly robust end to the financial year for the Indian economy, with sharper increases in new business spurring activity growth in both the manufacturing and service sectors. One disappointment, however, is the trend in employment, which showed little change through much of 2015-16.”

FocusEconomics Consensus Forecast panelists see fixed investment rising 7.5% in FY 2016, which is down 0.1 percentage points from last month’s estimate. For FY 2017, the panel expects fixed investment to increase 7.9%.

Operating conditions in India’s manufacturing sector were less upbeat in January from the previous month, with evidence suggesting that the Goods and Services Tax (GST) remains a risk to business performance as firms face delayed payments.